Earlier this year, Microsoft’s $69 billion acquisition of video game developer Activision Blizzard appeared to be in jeopardy. 

Antitrust regulators at the U.S. Federal Trade Commission (FTC) and the UK Competition and Markets Authority (CMA) attempted to block the merger, citing competition concerns for the nascent cloud gaming market. The deal has not been challenged by any other country, meaning that the United States and the United Kingdom are the sole holdouts, preventing an otherwise innocuous acquisition from closing. 

But the tide is shifting: Last week, a district judge denied the FTC’s request for a preliminary injunction, thus allowing the deal to proceed. In her opinion, Judge Jacqueline Scott Corley rejected the agency’s claims of consumer harm, pointing to numerous distribution agreements:

Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services…the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content.

The FTC appealed the district court’s decision and asked the Ninth Circuit and the Supreme Court to temporarily stop the deal from closing while the case is pending. Both requests were denied. The agency has also suspended its in-house proceeding against Microsoft.

Meanwhile, the CMA has softened its stance, writing that it “stand[s] ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in [its] final report.” This language is a significant departure from the final report, which concluded that “prohibition of the merger is the only effective remedy.”

As I have written previously, challenges to the Microsoft-Activision Blizzard deal have always been tenuous, relying on concerns about competitors rather than consumers. Yet, business rivalry is necessary for market competition, a natural feature of a well-functioning economy. 

It seems that regulators are finally course-correcting or, in the FTC’s case, finding that speculation is insufficient to stifle a harmless deal.